2021 (4) TMI 953 - AT - Income Tax

Rejection of books of accounts - Estimation of profit - AO Estimated the profit percentage at 8% of gross receipts on the main contracts and 6% on sub-contracts - CIT (A) who confirmed the assessment of profit on main contract at 8% and income from sub-contracts at 5% - HELD THAT - No reason to interfere with the orders of the CIT (A) as the CIT(A) has followed the precedents on the issue i.e. the decisions of the Tribunal which he has quoted in his order. Therefore, Grounds 1 and 2 are rejected. Enhancement of the income by the CIT (A) - CIT (A) has directed the Assessing Officer to verify whether the said amount disclosed by the assessee in the subsequent A.Y 2011-12 relate to the contract amount received in the A.Y 2010-11 and thereafter, in the event of assessee s failure to establish a direct nexus only, to enhance the amount to the extent of ₹ 6,38,691/. Therefore, no reason to interfere with this direction of the CIT (A). Assessee s appeal is dismissed.

Summary

Issues:
1. Estimation of income at 8% on main contracts and 5% on sub-contracts.
2. Enhancement of income by the CIT (A).

Analysis:
1. The assessee, engaged in a contract business, filed a return for A.Y 2010-11 with an income of ?12.00 lakhs. The Assessing Officer, during scrutiny, requested documents related to expenses, agreements, and TDS certificates, which the assessee failed to produce. Consequently, the AO estimated profits at 8% on main contracts and 6% on sub-contracts. The CIT (A) upheld the assessment at 8% and 5% respectively. The assessee appealed, challenging the estimation. The Tribunal, after considering precedents cited by the CIT (A), rejected the grounds of appeal related to income estimation on main and sub-contracts.

2. The CIT (A) enhanced the income by ?6,38,691, questioning its relation to the contract amount received in A.Y 2010-11. The Tribunal found the CIT (A) directed the AO to verify the nexus between the amounts disclosed in subsequent years and the contract amounts. The Tribunal upheld the CIT (A)'s direction, emphasizing the need for the assessee to establish a direct connection. Consequently, the Tribunal dismissed the appeal, affirming the CIT (A)'s decision on income enhancement.

In conclusion, the Tribunal upheld the estimation of income on main and sub-contracts as per precedents and supported the CIT (A)'s direction to verify the nexus between disclosed amounts in subsequent years and the contract amounts, leading to the dismissal of the appeal.